Food delivery and the rise of ghost kitchens

By PAULINE KAIRU

Online platforms, especially the online retail sector, fueled by changing tastes and the availability of a variety of products, have grown exponentially. The food delivery industry, in particular, has grown and grown so rapidly that it has spawned a whole new business model bringing together established restaurants and fast food outlets and delivery service providers through technology builders who provide an online platform.

And that’s where Uber Eats Kenya found itself in June, as it marked four years in the country, and faced with the rise and growth of ‘ghost kitchens’, as the food delivery space is growing, forcing it to experiment with integrating such kitchens as partners in their business plan.

A “shadow kitchen” is a professional food preparation or cooking facility set up to provide delivery-only meals. They are also known as black kitchen or cloud or virtual kitchen.

“Virtual or dark kitchens are gaining popularity globally, and many consumers appreciate their services as they tend to offer new and more variety of foods than established restaurants or fast food outlets. They are basically online restaurants or kitchens designed for the sole purpose of producing food for delivery. They don’t tend to have a storefront or restaurant version,” said Kui Mbugua, managing director of Uber Eats Kenya. They are just kitchens.

Caren Malesi of Uber Eats delivers food using her bike on July 8, 2022. PHOTO | JEFF ANGOTE | NMG

Fanciful names aside, the concept of ‘ghost’ or ‘dark’ kitchens has long satiated the working class across East Africa. The menu varies from supplier to supplier.

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In Kenya, they are simply “hot meal deliverers” who cook in “unknown” kitchens, pack and deliver or sell from office to office, to workers in shopping complexes, construction sites and even schools, basically through the word of mouth. . Today, the mobile phone has made this easier and better, as customers only need to call ahead to place their orders.

In Uganda, the same concept exists, across the economic spectrum. In Tanzania, the ‘mama ntilie’ concept works in the same way, with ready meals delivered or served in off-street hallways and sidewalks. There are no established dining spaces.

But with the advent of online platforms and mobile phones that allow their wide use, this ancient concept of food delivery has taken a commercial trajectory with companies such as Uber Eats, Jumia Foods, Bolt Foods and other small businesses. , taking it to a new level by partnering with big brands and established restaurants and fast food outlets to deliver their food more efficiently through online platforms. The concept is the same but technology is king here.

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Ken Leserion of Jumia Foods makes deliveries in Nairobi on July 8, 2022. PHOTO | JEFF ANGOTE | NMG

But the rise of dark kitchens is eating away at these heavily commercialized food delivery businesses. The food offered by dark kitchens is unbranded and delivered at a less commercial rate as the platform used is less formal and simpler.

Ghost kitchens also point to economic situations. They provide cheaper food at a lower cost by minimizing operations by not having physical eating spaces, just kitchens. Moreover, the fact that they are not dependent on any third-party provider gives them an advantage in reaching their clientele easily, since the service is direct.

And as Ms Mbugua says, “They usually have very low start-up and expansion costs, and can easily test and experiment with their menus”, which means they present good competition for large, established delivery companies like Uber Eats, Jumia Foods and Bolt. Foods that collaborate with well-known food traders.

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Nelson Kinyua of Bolt Food making a delivery in Nairobi on July 8, 2022. PHOTO | JEFF ANGOTE | NMG

She said that because of this, Uber Eats has dabbled in dark food offerings with some of its restaurant partners.

“Existing merchants on our platform sometimes also have dark kitchens, which they use to experiment with different menu items and cuisines, which may not be naturally affiliated with their existing brand, and then they can leverage our platform to get feedback and to optimize product market fit,” she said.

She said such experiences have helped their merchants continue to operate as dark, delivery-only kitchens or use what they’ve learned to set up catering services.

“By working with such partners, we’ve been able to help them identify the selection gaps in the different cities we operate in, and then they launch data-driven virtual kitchens that kind of help them in their core business, if their core business is catering to the customer base, to help them grow, or if they’re just delivery, they can be very nimble and minimal with operational costs and see better profit margins.

But Kenya is a dynamic market with a lot of potential, so the competition posed by ghost kitchens is not a big problem. “We will simply continue to bring our best practices, leveraging our global scale, our technology and the relationships we have established in the marketplace, with our partners, consumers and delivery people,” she said.

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Mercy Muhati operates a small food court in Bihi Towers in Nairobi on July 8, 2022. PHOTO | JEFF ANGOTE | NMG

However, as dynamic as the market is, unless its business plan considers the local food ecosystem as a whole, the food delivery business can also be challenging. For example, food tech start-up KUNE which operated a cloud kitchen in Nairobi recently folded over what company founder and CEO Robin Reecht has officially declared to be the inability to raise funds to maintain operations, while blaming the “economic downturn and tighter investment markets”. at the top.”

KUNE wanted to be a cloud kitchen that offers quality and cheap mass food, and also establish its own online delivery platform. It delivered none of them despite consuming a million dollar seed funding.

The restaurant and hot food industry in general in Kenya has always been diverse with niche sectors. In all urban areas of Kenya there are the regular ‘chips and chicken’ fast food outlets. This was dominated by the Kenchic brand for decades, but later independent operators flooded and expanded the fast food segment, eventually attracting international brands such as Pizza Inn, Debonairs, Burger Hut, Dominoes, KFC, etc. . Here are some of the brands now served by tech-driven food delivery companies.

Then there are the licensed kiosk food providers, with established kitchens and dining rooms on site, offering a large but fixed menu. The food here tends to be quality homemade, served in generous portions (inflation permitting) and always fresh. These establishments, always away from the main streets, have an unpretentious but high quality atmosphere. They tend to serve a huge market across all economic classes. They barely delivered at first, but today they serve both restaurant and on-call delivery through online platforms where they advertise themselves like any other business. These operations still seem informal but they comply with all official sanitary and commercial requirements.

The real informal food vendors operating out of dark kitchens are those who sell food in offices and malls to petty traders.

Thus, the rise of large, technology-enabled delivery companies has not disrupted the food delivery industry per se, but served a particular customer segment. The companies have just improved on what established restaurants were already doing, but now they bring the same food to more people, easily and faster.

And the proof lies in the awareness by companies like Uber Eats, which has had to expand its business flows to include grocery, alcohol, beauty and wellness deliveries. And in 2021, it has expanded further to include deliveries for pharmacies, supermarkets, florists, gas stations and water delivery.

In general, the whole delivery business is growing. “We have seen growth not just in our business, but in the industry as a whole,” Ms Mbugua said. “The entire delivery market is truly a booming industry. We have barely scratched the surface of its potential, and not just in Kenya, but across the continent.